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Getting inspired by the hotbed of innovation

WAITING to see whether legislation has a negative effect on the business environment and then changing things is not the best approach when it comes to a business environment, says Jake Slegers, the executive director of AmCham in Slovakia, adding that frequent legislative changes without proper impact assessment are damaging.

WAITING to see whether legislation has a negative effect on the business environment and then changing things is not the best approach when it comes to a business environment, says Jake Slegers, the executive director of AmCham in Slovakia, adding that frequent legislative changes without proper impact assessment are damaging.

The Slovak Spectator spoke to Slegers about the quality of the business environment in Slovakia, energy pricing, and the 20th anniversary of AmChamthis year.

The Slovak Spectator (TSS): AmCham recently criticised Slovakia for what it called “unpredictable rises” in electricity prices. Why are changing electricity prices problematic for the firms? What measures or approaches would help? Jake Slegers (JS): A CEO of a major US company that employs several thousand people in Slovakia said that they would like to build a major data centre here in Bratislava. Yet, he pointed out that it would be cheaper to open a centre in London, just because of electricity prices here. It is only one example, but indeed this situation is a challenge for companies who are huge consumers of energy by their nature. Electricity prices are ahindrance to their expansion, as it has a huge impact on the cost of running a company here, which we know that foreign investors look at when considering where to locate their operations or possibly expand.

However, it is not only IT companies that are affected, but especially the energy intensive manufacturing companies.We should bear inmind that Slovakia has a large industrial base and the impact of the increase in the regulated component of electricity prices is very negative on the competitiveness of Slovak industry. These manufacturing companies, which employ thousands of people in Slovakia, do not only have to face Europe-wide competition, but also extensive global competition. Increasing electricity prices, which are among the highest in the entire EU, therefore has a very negative impact on economic growth, employment and overall competitiveness of the Slovak economy. Therefore, we have formed a coalition of like-minded business institutions concerning electricity pricing and together we are asking the prime minister to initiate an open, transparent and institutionalised debate on the regulatory framework.

TSS: The European Union and the United States are negotiating the Transatlantic Trade and Investment Partnership Agreement (TTIP). What are the most challenging points in the discussion?JS: The most problematic part right now is the disinformation campaign that’s going on. Many people are utterly misinformed, and this is our biggest challenge. Every time we meet as American Chambers of Commerce in Europe the problem that we see is that wekeep preaching to the choir; a vast majority of our members support the agreement; however, it is the average man on the street who doesn’t have any idea, but who is confronted with this disinformation campaign.

Yet, the most important thing I would like to point out about this agreement is that it is a now-or-never opportunity. The US and the EU are on course to set global standards and if we don’t embrace this opportunity to set global standards, somebody else will. I don’t think it’s in anyone’s best interest if it is somebody else setting the global standards. This is often misinterpreted to lowering standards and the prevailing opinion in Europe is that European standards will be lowered to meet American standards. Yet, there will be no lowering of standards, but rather it will be equalisation. These are usually very small adjustments. Just in automotive production, which is very important for Slovakia, there are some minor adjustments to equalise measurements of car mirrors, for example.

TSS: Slovak President Andrej Kiska recently visited the United States and in San Diego he opened the Slovak American Innovation Centre. What can the United States offer to Slovaks who wish to innovate?JS: The United States is the hotbed of innovation, and its approach to innovation is attractive to many countries. The US has fostered innovation for years. I think that in Slovakia a rather negative cultural phenomenon has emerged and has entered the public’s consciousness over the last few years: fear of failure. It is judged far better not to have tried than to have tried and failed. In the US, there is a whole different approach towards this phenomenon – you try something and if it does not work out, you try something else. Every major CEO, everyone in business, has a story of failure from when they tried something and did not succeed.

TSS: Has the business environment changed over the past couple years in Slovakia? How do you assess its current state?JS: The business environment is frequently impacted by legislative changes. Tax legislation, energy pricing and labour legislation are important elements in doing business. We like to foster as business-friendly an environment as possible. Of course, we don’t like to see legislative changes that result in companies planning to look elsewhere to do business because that approach is very damaging to the competitiveness of Slovakia. We also don’t like to hear the phrase from the government: “if this has any negative effects, we’ll change it”. If we wait till the negative effects are obvious, it’s too late – the damage has been done.

What we find disheartening in the legislative sphere is often a very short-term approach to legislative changes and a lack of impact assessment of those changes prior to the actual drafting of the laws. Rapid changes to legislation without a thorough analysis of the impact is a potentially harmful process that we have frequently addressed. In fact, this is so important for us that we have initiated the formation of a grand coalition of all business associations, employers’ unions and chambers of commerce in a “Rule of Law Initiative”, the result of which will be specific recommendations to the government on how to address some of these issues.

TSS: Which sectors of Slovakia’s economy have so far been the most attractive for US investors and businesses? Where do you see further opportunities in Slovakia for US investors and businesses?JS: What we’ve seen in the few last years is a boom of suppliers to the automotive industry, which is quite big here in Slovakia. We should make the most out of that, but we have also seen a dramatic increase in business service centres. We have just formed our own initiative for these business service centres. There are now thousands of people employed in that business sector. We are working to expand that niche even further. We of course support transformation to a knowledge-based society, innovation and entrepreneurship as well.

TSS: AmCham is marking its 20th anniversary this year. What do you consider to be its biggest achievements, and what are, in your opinion, the contributions that AmCham has made to the business environment?JS: If we look back to AmCham’s formation and its position in its first 10 years, possibly it was a bit more of a social club that provided a gathering of American and like-minded companies with a very strong focus on networking. While we still retain that networking element, we have progressed considerably in advocacy for our members and directly addressing policy issues with the Slovak government. We are now especially focused on raising awareness of the issues, bringing these issues to the business community and gathering the collective positions of our members, and then bringing these issues with one voice to the Slovak government. That seems to be, in our case, a voice that the government is willing to listen to, and to take into consideration. We do see evidence of that in how our activities with the Office of the Slovak Government, with the Ministry of Foreign Affairs, the Ministry of Economy, the Ministry of Finance and the Ministry of Education, and other ministries as well, have developed and that we are often asked to be an equal working partner with them on issues or at conferences.

I would point out our consistent work in two particular areas that we have addressed quite regularly and quite successfully over the years: labour and tax legislation, just to pick a couple of issues. We have been successful several times in creating an umbrella for other like-minded institutions on both issues. What I see as our major accomplishment is being a trusted partner for the government and a trusted partner for other like-minded organisations.

TSS: Could you name some important plans or challenges the chamber faces?JS: As I mentioned before, our major focus for this year is our Rule of Law Initiative, basically addressing areas having to do with corruption, and transparency in general, rapid unplanned legislative changes, and the Slovak judiciary and its transparency. We would also like to foster more mutual trade between the US and Slovakia next year, especially in the light of the TTIP.

TSS: Your personal story in Slovakia has been quite intertwined with AmCham. What are the most challenging issues you have been dealing with?JS: I became actively involved with the AmCham in 1999 as part-time deputy director, and as director in 2000. That makes 15 years, and as a director it will be 14 years in December. I am one of the longest-serving directors in American Chambers of Commerce in Europe. One of the most challenging issues I’ve had to deal with in my time as director has been the global financial crisis and its impact on our member companies and on the chamber. It was one of life’s greatest lessons on how to continue to manage and maintain operations under those conditions. Looking at 2009 and 2010, those were truly challenging years where we had to be very creative in many ways, to help us get through the crisis period.

But I have indeed enjoyed my time with AmCham and the immense opportunities it has provided me through the years as well.